A company going public is monumental in its path to success. By going public, a company is now able to raise capital from public investors instead of private investors and venture capitalists. Private investors have a very opportune time to look at their gains of their investment. There are several stipulations and topics to think about before having your company go public. Continue reading for key points that need great understanding and consideration before a very important IPO.
Is an IPO feasible for your company?
Before your company goes public, you need to understand several aspects of your company so you can have continued success after the IPO. Is the market big enough where you can make more money and grow the company? Is your product distributive enough to gain major traction in the market from standing out? Do you have a predictable business model to predict where you will be in the future? What is your competitive advantage? These are all extremely important questions to have answered.
What is our stock compensation going to look like?
You will want to investigate how shares were granted to you and other founders and see how they will be taxed because all three types of stock options are taxed differently. If you have restricted stock units (RSUs), you need to have the date it was acquired, the date it was vested, and the price it was vested at saved in your records. If you have incentive stock options (ISOs) or non-qualified stock options (NQSOs), you need the grant date, vesting date, the timeline of vesting, the class level your shares have, the price, and expiration date saved in your records. Be sure to check how your stock options will affect your taxes.
How will your taxes be impacted?
Since each person’s tax situation is different, it is important to speak with a tax advisor before your company IPOs. Your tax advisor will help you plan ahead to significantly reduce your tax burden, in the case that you have a dramatic increase in income for one year, changing your tax rate significantly.
Do you have an objective view of your company?
When your company goes public, your valuation will either increase or decrease. While you have built this company from the ground up and are extremely invested emotionally and financially, you must become unbiased towards your company. Do you have an understanding of where it is today and where it can go through this IPO? What are your certainty and uncertainty levels? Having a realistic, objective view of your company will allow you to make the best choices.
When having your company go public you need to have a concrete understanding of how it will impact you and your company. Having these questions answered put you on the path to a success IPO!
If you would like to learn about Eagle Grove Advisors and how we can help you meet your financial goals, schedule a time on my calendar here!
Sources:
https://craft.co/blog/10-things-to-consider-before-your-company-files-an-ipo
http://www.sigmaprime.com/blog/8-things-any-company-should-consider-ipo
